Dahlia Ltd v Four Millbank Nominees Ltd [1977] EWCA Civ 5 (24 November 1977)

Dahlia Ltd claimed damages for breach of a unilateral contract, alleging the first defendants promised to exchange written sale contracts for properties if the plaintiffs attended with a banker's draft and signed contract. The Court of Appeal held the unilateral contract fell within Section 40 of the Law of Property Act 1925 as a contract for disposition of an interest in land, and was unenforceable without sufficient part performance.

Facts

The plaintiff, Dahlia Ltd, negotiated with the first defendants, Four Millbank Nominees Ltd (mortgagees selling commercial and residential properties), regarding the purchase of properties known as the Gill Portfolio. The terms of sale were agreed on 21st December 1976. On the afternoon of that day, Mr Osgoodby, acting for the first defendants, allegedly promised that if the plaintiffs procured a banker’s draft for the deposit and attended the defendants’ offices before 10am on 22nd December 1976 with their signed part of the contract ready for exchange, the defendants would enter into the contract of sale. The plaintiffs duly attended at the appointed time with the deposit and signed contract, but the first defendants refused to exchange contracts.

No written contracts were ever exchanged, and no bilateral contract of sale existed. The plaintiffs sued on the alleged unilateral contract, claiming damages for breach.

Issues

First Issue

Whether the facts pleaded established a valid unilateral contract by the first defendants to enter into a written contract of sale.

Second Issue

Whether such a unilateral contract was unenforceable under Section 40 of the Law of Property Act 1925 for want of a written note or memorandum.

Third Issue

Whether there were sufficient acts of part performance to take the case outside the statute.

Judgment

On the First Issue

The Court of Appeal held that the pleaded facts were capable of establishing a concluded unilateral contract. Lord Justice Goff held that the plaintiffs had fully performed or satisfied the condition when they presented themselves at the appointed time and place with the banker’s draft and their signed part of the contract, tendering the same for exchange.

On the Second Issue

The Court held that the unilateral contract fell within Section 40 of the Law of Property Act 1925. Lord Justice Goff reasoned that whilst the contract was not itself a contract for sale of land, it was a contract for the disposition of an interest in land. Performance of the unilateral contract would have created an equitable interest in the land in favour of the plaintiffs, as a specifically enforceable contract of sale confers such an interest.

“It follows in my judgment that the unilateral contract was a contract to dispose of an interest in land, because it was a contract to do something which would have that effect in law.”

Lord Justice Buckley agreed, stating that if the contract to exchange agreements was specifically enforceable, it must itself have given rise to an equitable interest in land.

On the Third Issue

The Court held that the alleged acts of part performance were insufficient. Lord Justice Goff explained that the acts relied upon did not of themselves suggest the existence of any contract between the parties. Rather, they pointed to parties about to make or contemplating making a contract. Lord Justice Goff referred to Lord Reid’s statement in Steadman v Steadman:

“You must not first look at the oral contract and then see whether the alleged acts of part performance are consistent with it. You must first look at the alleged acts of part performance to see whether they prove that there must have been a contract and it is only if they do so prove that you can bring in the oral contract.”

Implications

This case establishes that a unilateral contract to enter into a written contract for the sale of land is itself a contract for the disposition of an interest in land within Section 40 of the Law of Property Act 1925, and therefore requires written evidence to be enforceable. The reasoning prevents the evasion of the statute through the device of framing claims as breaches of preliminary agreements to contract rather than breaches of the substantive sale contract itself.

The Court expressed regret at the outcome, noting that the defendants’ conduct appeared unmeritorious, but felt bound by the statutory requirements. This case remains significant authority on the application of formality requirements to preliminary agreements concerning land transactions.

Verdict: Appeal dismissed. The statement of claim was struck out and the action dismissed against the first defendants. The unilateral contract was held unenforceable under Section 40 of the Law of Property Act 1925 for want of written memorandum, and the alleged acts did not constitute sufficient part performance.

Source: Dahlia Ltd v Four Millbank Nominees Ltd [1977] EWCA Civ 5 (24 November 1977)